New Zealand trade has more political significance

The trade deal with New Zealand concluded after 16 months of negotiations has more political than economic significance, showing that the UK can negotiate post Brexit trade deals quickly.  It is hoped that it will ‘pave the way’ for the UK to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).

The deal envisages that tariff-free sheepmeat quotas will grow by 35,000t/year for the first four years (on top of the country’s existing 114,000t WTO quota) and then by 50,000t/year from year’s five to 15. This will give New Zealand a combined tariff-free access of up to 149,000t of sheepmeat in year one, rising to 164,000t in years five to 15 – quantities the country has failed to fulfil in recent times.

For beef, New Zealand currently has just 545t/year of duty-free access to the UK, but the planned deal will see this increase steadily to 38,820t by year 10, and 60,000t by year 15. 

The National Sheep Association argued that in addition to the increase in access by Australia, in just over a decade, these two countries will have access to the UK’s entire volume of lamb consumption.  Despite fears that the red meat market will be hit, Asian markets are a priority for Australia and New Zealand as they are closer and more profitable.

Farmers not ready for withdrawal of support

Some 36 per cent of farm income depends on the Basic Payment Scheme, but one in three farmers are yet to start preparing for its withdrawal according to a survey for Farmers Weekly.   79 per cent of farmers have no clear idea how their farm business will survive without it.   Lowland livestock enterprises are particularly reliant on the basic payment.

Just 15 per cent of farmers say they are interested in taking a lump sum to retire from farming.

53 per cent of farm businesses say they have already diversified.   Of these 51 per cent have a renewable energy scheme, including solar panels (76 per cent), biomass boilers (26 per cent), wind power (22 per cent) and anaerobic digestion (7 per cent).

The next most popular diversification is holiday accommodation (24 per cent), followed by offices and workspace (10 per cent), leisure activities (7 per cent) and farm shops, cafés and restaurants (5 per cent).

Principles that should underpin food policy

Tim Lang and colleagues from the Food Research Collaboration set out nine principles and tests to guide future food policy: https://foodresearch.org.uk/publications/testing-times-for-uk-food-policy-nine-principles-and-tests/

The National Food strategy will be published later this week, and beyond it a White Paper and potentially legislation to implement changes. The latest report from Professors Tim Lang, Erik Millstone and Terry Marsden sets the stage for these post-Brexit developments with nine Principles and Tests that civil society and the public can use to assess whether the important food policy developments that lie ahead serve the public and national interest. 

Helping older farmers retire

The Government's scheme to fund early retirement for farmers has had a mixed reception, although some farming organisations have given it a qualified welcome.   This extensive report includes a quote from me: https://www.newsandstar.co.uk/news/19313523.cumbria-reacts-government-scheme-pay-older-farmers-retire/

Cabinet row over Australian trade deal

A battle royal is in progress in Cabinet on whether Britain should agree a tariff free trade deal with Australia.  Brexiteers think that if a trade deal cannot be concluded with Australia no deals will be possible for the new 'Global Britain'.

However, farmers - already reeling from the phasing out of support payments - are concerned that it could hit their markets and be a precedent for future deals, particularly those with the US and New Zealand.

On one side of the argument is international trade secretary Liz Truss.   On the other side is Defra secretary of state George Eustice, backed up by Michael Gove.   Gove is concerned that rural areas in Wales and Scotland would be hard hit, further undermining the union.   Reports are suggesting that Boris Johnson may come down in favour of the deal.

Beef and sheep meat would be the main commodities affected, although Australia is also interested in exporting more cheese.   There is a 20 per cent tariff on beef at present which would be phased out over 15 years.   

Australian farmers benefit from greater economies of scale, allowing them to undercut on price.  The writer well remembers visiting a huge drylot beef farm in New South Wales.

The RSPCA said Australia had lower standards on chlorinated chickens, sow stalls that confine pregnant pigs and growth hormone treatment for beef.

How farmers voted on Brexit

A lot of myths have grown up about how farmers voted in the referendum on leaving the EU.  Based on a self-selected Farmers Weekly survey, or simply on anecdotal evidence about posters on countryside hoardings, a view has developed that farmers voted overwhelmingly for Brexit.

Up to now we have lacked any hard evidence, but that has been rectified by a survey of farmers reported in the Journal of Rural Studies by Daniel May and his colleagues.

The headline finding is that farmer voting was not greatly out of line with the electorate as a whole.  50 per cent reported voting leave, 45 per cent remain and 5 per cent did not vote.  This implies a higher turnout than the population as a whole, although some who did not vote claim that they did in surveys.

There was a slight tendency for women farmers to be more likely to vote remain.  However, the strongest predictor of voting behaviour was level of education.  60 per cent of those with GCSE or equivalent voted to leave compared with 20 per cent of those with postgraduate education (admittedly a small N).

Dairy farmers voted leave by 58 per cent to 38 per cent and pig and poultry farmers had a 53 per cent to  34 per cent leave lead.  Pig and poultry farmers received relatively little from the CAP and dairy farmers may have seen themselves as tightly regulated by it.

There were some regional differences.   Farmers in Scotland deviated from the trend there with 67 per cent voting leave (51 per cent in Wales).  Farmers in the east and south of the country were more likely to vote remain, but in part this reflected national voting trends.

The 'bring back control' theme seems to have resonated with farmers in terms of their personal perceptions.   Farmers who state that they face too many restrictions imposed by the EU including those on agrochemicals were more likely to vote leave.   For some EU regulations were seen as preventing them making higher profits or having more market power.   Voting for Brexit is perceived as delivering more control over their businesses.

A first draft on the effects of Brexit

This article appeared in the latest issue of South-East Farmer:

Many farmers breathed a sigh of relief when a last minute trade deal was agreed between the UK and the EU, avoiding the threat of tariffs and quotas on agricultural exports.   Of course, this would have affected some sectors more than others, notably those farming sheep.  Such enterprises exist within the south-east of England, but they are more characteristic of remote hill farming areas in all the four nations of the United Kingdom.

I must admit to having a personal interest as my brother-in-law and nephew are sheep farmers in a remote part of Wales.   They have merged three farms in order to run as lean and efficient an operation as possible.   However, the whole enterprise is reliant on selling sheep for meat and the price they receive is influenced by the 40 per cent or so of total output that goes to mainland Europe.   The price received for wool scarcely covers the cost of shearing, if that, and rental income from properties and telephone masts is very much secondary.   The suggestion made by one politician that sheep farmers could shift to beef ignores the realities of production.

Farmers are generally enterprising and keen to keep input costs under control.   One farmer I know in Yorkshire produces honey with a distinctive taste from the moors, but still principally relies on his contract with a leading supermarket.   The more general point here is that the basic payment received by farmers under the Common Agricultural Policy is being replaced by a smaller domestic payment that is being phased out more quickly than some had anticipated, particularly for larger scale farms.

Other new forms of payment will be available, principally the Environmental Land Management Scheme, although that is still being developed and tested.  Along with other payments, it will fall well short of compensating farmers for the loss of the basic payment which made the difference between profit and loss for many farm enterprises.    It will also involve form filling to obtain, along with monitoring of outcomes, and is likely to be more suitable for farmers in remoter areas.   This is not necessarily a bad thing from an overall policy point of view, but it may prove challenging for, for example, larger scale arable farmers in south-east England.

In areas like the south-east there are, of course, opportunities for diversification that may not exist in remoter areas, particularly those that are less suited to tourism.   In this area as well, farmers have been very innovative in the range of ideas they have put into practice.   There can, however, come a point where one is no longer running a farm business, but a farm that enhances other projects such as wedding venues, restaurants, shops and petting zoos.

It is, of course, a personal business decision how far to go down this route.   A note of caution is necessary for late adopters.  Much of the low hanging fruit has already been taken.   The capital costs can be considerable and the skills required can be very different from decisions about what to plant, when to spray and when to harvest.   That said, many farmers manage to both farm and run complementary businesses.

Agriculture was the dog that didn’t bark in the night time in the very long legal text arrived at between the UK and the EU.   Indeed, listening to the discussions during the negotiations, one was left with the impression that fisheries were the really vital sector despite the fact that it accounts for a smaller share of the economy than agriculture.   Fish did enjoy considerable symbolic value in terms of ‘taking back control’.

There was an annex on trade in wine.   This is not really my area of expertise, apart from enjoying it and investing in one well-known business in the South-East.  As with most such agreements, the devil is in detail, but I would have thought that at first glance it was broadly acceptable to those growing grapes and producing wine in England.  [A subsequent article in the Financial Times refers to certification costs which could add £1.50 to a £12 bottle of imported wine.  This, of course, could make domestically produced wine more price competitive, although factors other than price can play a big part in purchase decisions].

In simple terms what the annex says is that EU and the UK should import and consume each other’s wine, although the flow is clearly from the EU direction.   The documentation required is limited to a certificate which can be produced electronically.   The self-certification is limited to eleven relatively straightforward questions.  The agreement will be reviewed after three years, a shorter period than for fisheries.